Should industry be alarmed by falling oil prices? IEA’s plan to draw down 60 million barrels of emergency oil stocks (including 30 million barrels from the U.S. SPR) pushed Nymex crude futures to their lowest level of the year. The IEA action is a response to recent OPEC disarray over whether or not to make up the Libyan shortfall.

 

The Land Rig Newsletter team, in the latest issue of the Biweekly Report, contends that ultimately the impact on U.S. liquids drilling will prove to be inconsequential in the greater scheme of things. First, Saudi Arabia has already signaled its intent to unilaterally and indefinitely offset the loss of Libyan supply despite OPEC’s lack of cohesion on the issue. In terms of overall market concerns, the move simply forestalls any Saudi urgency to ramp up supply. Second, the main driver in U.S. liquids drilling is not high oil prices but surging demand for NGLs. Thanks to growing supplies of low-cost ethane feedstock spawned by the liquids drilling boom, the U.S. is enjoying a spike in exports of petrochemicals.

Bloomberg reported after Israeli Foreign Minister Avigdor Lieberman said two Iranian gunboats are planning to move through the Suez Canal to Syria, it caused oil price to rise also spurring the concern that Middle Eastern oil shipments may be disrupted. Crude oil for March delivery gained $0.67 to settle at $84.99 a barrel on the New York Mercantile Exchange.

Bloomberg reported that crude oil fell as the continued concern eased that supplies through the Suez Canal may be disrupted by unrest in Egypt. Tom Bentz, with BNP Paribas Commodity says, “The unrest in Egypt has had no impact on oil movements and OPEC has said that they would make up for any disruption,” crude oil for March delivery fell $1.42 to settle at $90.77 a barrel on the New York Mercantile Exchange.

Bloomberg reported crude oil rose after BP, Plc. and its partners in the Trans Alaska Pipeline System, which carries 15% of U.S. output, couldn’t say when production would return after the line was shut following a leak. Crude oil for February delivery increased $1.22 to settle at $89.25 a barrel on the New York Mercantile Exchange. 

Crude oil fell as the U.S. dollar strengthened against the euro. Bloomberg reported crude oil fell as the strengthening economy raised speculation that the U.S. will begin to withdraw stimulus measures, which would further bolster the U.S. dollar. Crude oil for February delivery declined $1.92 to settle $88.38 a barrel on the New York Mercantile Exchange.

Oil advanced after a Bloomberg report showed U.S. retailers had their best holiday sale in five years. Energy analysts expect crude oil to keep advancing. The president of Oil Outlooks & Opinions, LLC said, “We’re staying in the $90.00 area, with an eye on hitting $100.00 in the New Year. Demand is picking up and should rise further in coming months.” Crude oil for February delivery gained $0.49 to settle at $91.49 a barrel on the New York Mercantile Exchange.